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Chapter Title
Culture and

Screen graphics created by:

16/e PPT Jana F. Kuzmicki, Ph.D.
Troy University-Florida Region
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
“The biggest levers
you’ve got to change a
company are strategy,
structure, and culture. If I
could pick two, I’d pick
strategy and culture.”
Wayne Leonard, CEO Entergy
“An organization’s capacity
to execute its strategy
on its “hard” infrastructure –
its organization structure and
systems – and on its “soft”
infrastructure – its culture
and norms.”
Amar Bhide
Chapter 13 Roadmap
 Instilling
a Corporate Culture that Promotes Good Strategy
 Identifying the Key Features of a Company’s Corporate Culture
 Strong versus Weak Cultures
 Unhealthy Cultures
 High-Performance Cultures
 Adaptive Cultures
 Culture: Ally or Obstacle to Strategy Execution?
 Changing a Problem Culture
 Grounding the Culture in Core Values and Ethics
 Establishing a Strategy-Culture Fit in Multinational Companies
 Leading the Strategy Execution Process
 Staying on Top of How Well Things Are Going
 Putting Constructive Pressure on the Organization to Achieve Good Results
and Operating Excellence
 Leading the Development of Better Competencies and Capabilities
 Displaying Ethical Integrity and Leading Social Responsibility Initiatives
 Leading the Process of Making Corrective Adjustments

Defining Characteristics
of Corporate Culture
 Core values, beliefs, and business principles
 Ethical standards
 Operating practices and behaviors defining
“how we do things around here”
 Approach to people management
 “Chemistry” and “personality” permeating
work environment
 Oft-told stories illustrating
 Company’s values
 Business practices
 Traditions
Features of the Corporate
Culture at Wal-Mart
 Dedication to customer satisfaction
 Zealous pursuit of low costs
 Frugal operating practices
 Strong work ethic
 Ritualistic Saturday morning meetings
 Executive commitment to
 Visit stores
 Listen to customers
 Solicit employees’ suggestions
Features of the Corporate
Culture at General Electric
 Hard-driving, results-oriented atmosphere prevails
 All businesses are held to a standard
of being #1 or #2 in their industries as
well as achieving good business results
 Extensive cross-business sharing of ideas, best
practices, and learning
 Reliance on “workout sessions” to identify, debate,
and resolve “burning issues”
 Commitment to Six Sigma Quality
 Globalization of the company
Features of the Corporate
Culture at Occidental Petroleum
 Entrepreneurship of employees
 Empowered employees are encouraged to
 Be innovative
 Excel in their fields of specialization
 Respond quickly to strategic opportunities
 Creatively apply state-of-the-art technology in a manner
to promote operating excellence

Features of the Corporate
Culture at Nordstrom’s
 Deliver exceptional customer service to customers
 Company motto
 “Respond to Unreasonable
Customer Requests”

 Out-of-the-ordinary
customer requests
viewed as opportunities for “heroic” acts
 Promotions based on outstanding service
 Salaries based entirely on commission
Identifying the Key Features
of Corporate Culture
A company’s culture is manifested in . . .
 Values, business principles, and ethical standards preached
and practiced by management
 Approaches to people management and problem solving
 Official policies and procedures
 Spirit and character permeating work environment
 Interactions and relationships among managers and
 Peer pressures that exist to display core values
 Its revered traditions and oft-repeated stories
 Its relationships with external stakeholders
Where Does Corporate
Culture Come From?
 Founder or early leader
 Influential individual or work group
 Policies, vision, or strategies
 Operating approaches
 Company’s approach to people management
 Traditions, supervisory practices, employee attitudes
 Organizational politics
 Relationships with stakeholders
Role of Stories at Microsoft

Oft-told stories focus on . . .

 Long work hours of programmers
 Emotionalpeaks and valleys in encountering and
overcoming coding problems
 Exhilaration of completing a complex program on
 Satisfaction of working on cutting-edge projects
 Rewards of being part of a team responsible
for a popular new software program
 Tradition of competing aggressively
How Is a Company’s Culture Perpetuated?

 Selecting new employees who will “fit” in

 Systematic indoctrination of new employees
 Senior management efforts to reinforce core
values, beliefs, principles, key operating practices
 Story-telling of company legends
 Ceremonies honoring employees
who display cultural ideals
 Visiblyrewarding those
who follow cultural norms
Forces Causing Culture to Evolve
 New challenges in marketplace
 Revolutionary technologies
 Shifting internal conditions
 Internal crisis
 Turnover of top executives
A new CEO who opts to change things
 Diversification into new businesses
 Expansion into foreign countries
 Rapid growth that involves adding many new
 Merger with or acquisition of another company

Company Subcultures: Problems Posed by
New Acquisitions and Multinational Operations
 Values, beliefs, and practices within a company can vary by
 Department
 Geographic location
 Business unit
 Subcultures can clash if
 They embrace conflicting business philosophies
 Key executives use different approaches to people
 Differences between a company’s culture and recent
acquisitions have not been ironed out
 Existence of subcultures does not preclude important areas
of commonality and compatibility being established in
different countries
Types of Corporate Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

High-Performance Cultures

Adaptive Cultures
Characteristics of
Strong Culture Companies
 Conduct business according to a clear, widely-
understood philosophy
 Considerabletime spent by management
communicating and reinforcing values
 Values are widely shared and deeply rooted
 Have a well-defined corporate character,
reinforced by a creed or values statement
 Carefulscreening/selection of new
employees to be sure they will “fit in”
How Does a Culture Come to Be Strong?

 Leaderwho establishes values and behaviors

consistent with Values
 Customer needs Customers
 Competitive conditions Shareholders
 Strategic requirements
A deep, abiding commitment to espoused
values, beliefs, and business philosophy
 Practicing what is preached!
 Genuine concern for well-being of
 Customers
 Employees
 Shareholders
Characteristics of Weak Culture Companies

 Lack of a widely-shared core set of values

 Few behavioral norms evident in operating
 Few strong traditions
 No strong sense of company identity
 Little cohesion among departments
 Weak employee allegiance to
company’s vision and strategy
Characteristics of Unhealthy Cultures
 Highly politicized internal environment
 Issues resolved on basis of political clout
 Hostility to change
 Avoid risks and don’t screw up
 Experimentation and efforts to
alter status quo discouraged
 “Not-invented-here”mindset – company
personnel discount need to look outside for
 Best practices
 New or better managerial approaches
 Innovative ideas
 Disregardfor high ethical standards and
overzealous pursuit of wealth by key executives
Characteristics of
High-Performance Cultures
 Standout cultural traits include
 A can-do spirit
 Pride in doing things right
 No-excuses accountability
 A results-oriented work climate in which people go the extra
mile to achieve performance targets
 Strong sense of involvement by all employees
 Emphasis on individual initiative and creativity
 Performance expectations are clearly identified for all
organizational members
 Strong bias for being proactive, not reactive
 Respect for the contributions of all employees
Hallmarks of Adaptive Cultures
 Willingness to accept change and embrace challenge
of introducing new strategies
 Risk-taking, experimentation, and innovation to satisfy
 Entrepreneurship is encouraged
and rewarded
 Funds provided for new products
 New ideas openly evaluated
 Genuine interest in well-being
of all key constituencies
 Proactive approaches to
implement workable solutions
Dominant Traits of Adaptive Cultures
 Any changes in operating practices and behaviors
 Must not compromise core values and long-standing business
 Must be “legitimate” in the sense of not having an inappropriate or
unfair impact on the best interests of key stakeholders
 Customers
 Employees
 Shareholders
 Suppliers
 Communities

Culture: Ally or Obstacle
to Strategy Execution?
A company’s culture can contribute to – or hinder
– successful strategy execution

A culture that promotes attitudes and behaviors

that are well-suited to first-rate strategy
execution is a valuable ally in the strategy
execution process

A culture where attitudes

and behaviors impede
good strategy execution is a
huge obstacle to be overcome
Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit
A culture that encourages actions and behaviors
supportive of good strategy execution
 Provides employees with clear guidance regarding what
behaviors and results constitute good job performance
 Creates significant peer pressure among co-workers to
conform to culturally acceptable norms
A culture imbedded with values and behaviors
that facilitate strategy execution promotes
strong employee commitment to the company’s
 Vision
 Performance targets
 Strategy
Optimal Outcome of a
Tight Culture-Strategy Fit
A good job of culture-building by managers
 Promotes can-do attitudes
 Encourages acceptance of change
 Instills strong peer pressure for
strategy-supportive behaviors
 Enlists enthusiasm and dedicated
effort to achieve company objectives

Closely aligning corporate culture with the

requirements for proficient strategy execution
merits the full attention of senior executives!
The Perils of Strategy-Culture Conflict

 Conflictsbetween culturally-approved
behaviors and behaviors needed for good
strategy execution send mixed signals
 Should employees by loyal to the culture and company
traditions and resist actions and behaviors promoting
better strategy execution?
 Or should they support the strategy by engaging in
behaviors that run counter to the culture?

When a company’s culture is out of sync with

what is needed for strategic success, the culture
has to be changed as rapidly as can be managed!
Creating a Strong Fit
Between Strategy and Culture

Responsibility of Strategy Maker –

Select a strategy compatible with the
sacred or unchangeable parts of
organization’s prevailing corporate culture

Responsibility of Strategy Implementer –

Once strategy is chosen, change
whatever facets of the corporate
culture hinder effective execution
Fig. 13.1: Changing a Problem Culture

Menu of Culture-Changing Actions
 Make a compelling case why a new cultural
atmosphere is in best interests of both company and
 Challenge status quo
 Create events where employees
must listen to angry key stakeholders
 Citewhy and how certain behavioral norms and work
practices in current culture pose obstacles to good
execution of new strategic initiatives
 Explain how new behaviors and work practices to be
introduced will be more advantageous and produce
better results
Substantive Culture-Changing Actions

 Replace key executives strongly associated with

old culture
 Promote individuals who have desired cultural traits
and can serve as role models
 Appoint outsiders who have desired
cultural attributes to high-profile positions
 Screen all candidates for new positions carefully,
hiring only those who fit in with the new culture
 Mandate all company personnel attend culture-
training programs to learn more about new work
practices, operating approaches, and behaviors
Substantive Culture-
Changing Actions (continued)
 Push hard to implement new-style work practices
and operating procedures
 Design compensation incentives to reward teams
and individuals who display the desired cultural
 Grant generous pay raises to individuals who lead
the way in adopting desired work practices,
displaying new-style behaviors, and achieving
pace-setting results
 Revise policies and procedures
in ways to drive cultural change
Symbolic Culture-Changing Actions

 Lead by example – Walk the talk

 Emphasize frugality
 Eliminate executive perks
 Require executives to spend
time talking with customers
 Ceremonial events to praise people and
teams who “get with the program”
 Alter practices identified as cultural hindrances
 Visible awards to honor heroes
Grounding the Culture in
Core Values and Ethics
A culture based on ethical principles is
vital to long-term strategic success
Our ethics
 Ethics programs help make consists of . . .

ethical conduct a way of life

 Executives must provide genuine support

of personnel displaying ethical standards
in conducting the company’s business

 Value statements serve as a

cornerstone for culture-building
Approaches to Establishing
Ethical Standards
 Formal values statement and a code of ethics
 Word-of-mouth indoctrination and tradition
 Annual reports and Websites
 Making stakeholders aware of a commitment
to ethical business conduct is attributable to
 Greater management understanding of role
these statements play in culture building
 Renewed focus on ethical standards
stemming from recent corporate scandals
 Growing numbers of consumers who
prefer to patronize ethical companies
Test Your Knowledge

Which of the following topics would least likely be a topic or

element of a company’s statement of its core values?
A. A dedication to superior customer service, top-notch quality,
product innovation, and/or technological leadership
B. An expectation that company personnel will display creativity,
exercise initiative, and accept responsibility
C. Prohibiting giving or accepting bribes, kickbacks, or gifts
D. A commitment to exhibiting such qualities as integrity,
fairness, trustworthiness, pride of workmanship, Golden Rule
behavior, and respect for co-workers
E. A commitment to making the company a great place to work

Test Your Knowledge

Which of the following topics would least likely be contained in

a company’s code of ethics?
A. Expecting all employees to not divulge trade secrets or
proprietary information to outsiders
B. Expecting all company personnel to display honesty and
integrity in their actions and avoid conflicts of interest
C. Not dealing with suppliers that employ child labor or engage in
other unsavory practices
D. Committing to create a work environment characterized by
teamwork and employee empowerment
E. Mandating full compliance with all laws and regulations

Fig. 13.2: The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards

Techniques to Transform Core Values and
Ethical Standards into Cultural Norms
 Screen out applicants who do not exhibit compatible
character traits
 Incorporate values statement and ethics code in
employee training programs
 Strong endorsement by senior executives of the
importance of core values and ethical principles at
company events and in internal communications
 Use values statements and codes of ethics as
benchmarks to judge appropriateness of company
policies and operating practices
 Make the display of core values and ethical principles a
big factor in evaluating employee performance
Techniques to Transform Core Values and Ethical
Standards into Cultural Norms (continued)
 Make sure managers at all levels are diligent in
stressing the importance of ethical conduct and
observance of core values
 Encourage everyone to use their influence in
helping enforce observance of core values and
ethical standards
 Hold periodic ceremonies to recognize individuals
and groups who display the values
 Institute
enforcement procedures
Fig. 13.3: The Benefits of Cultural Norms Strongly
Grounded in Core Values and Ethical Principles

Establishing a Strategy-Culture Fit in
Multinational and Global Companies
 Institute training programs to
 Communicate the meaning of core values and
 Explain the case for common operating
principles and practices
 Create a cultural climate where the norm is to
 Adopt best practices
 Use common work procedures
 Pursue operating excellence

 Give local managers

 Flexibility to modify people management
approaches or operating styles
 Discretion to use different motivational and compensation
incentives to induce personnel to practice desired behaviors
For Discussion: Your Opinion

Identify one cultural trait that you would like to see at

the company you decide to go to work for when you
graduate? Why is this cultural trait important to you?


Numerous Roles of Strategic Leaders

Taskmaster Mentor
Visionary Builder

Negotiator Process Coach

Chief Integrator
& Strategist Capabilities
Resource Acquirer &
Allocator Spokesperson

Crisis Motivator Consensus

Builder Chief
Solver Administrator
Policy & Strategy
Enforcer Policymaker Implementer

Leadership Activities of Chief
Strategy Implementer
1. Stay on top of what’s happening

2. Put constructive pressure on

company to achieve good results

3. Lead development of stronger core

competencies and competitive capabilities

4. Exercise ethics leadership and lead social

responsibility initiatives

5. Take corrective actions to improve overall strategic

Role #1: Stay on Top of What’s Happening

 Develop a broad network of formal

and informal sources of information
 Talk with many people at all levels
 Be an avid practitioner of MBWA
 Observe situation firsthand

 Monitor operating results regularly

 Get feedback from customers
 Watch competitive reactions of rivals
Role #2: Put Constructive Pressure on
Company to Achieve Good Results
 Successful leaders spend time
 Mobilizing organizational energy behind
 Good strategy execution and
 Operating excellence
 Nurturing a results-oriented work climate
 Promoting certain enabling cultural drivers
 Strong sense of involvement on part of company personnel
 Emphasis on individual initiative and creativity
 Respect for contributions of individuals and groups
 Pride in doing things right
Approaches to Instilling a
Spirit of High Achievement
 Treat employees with dignity and respect
 Make champions out of people who excel
 Encourage employees to use initiative
 Set stretch objectives and expectations that employees are
to give their best
 Use tools of benchmarking, best practices, business process
reengineering, TQM, and Six Sigma quality to focus
attention on continuous improvement
 Use full range of motivational techniques
and compensation incentives to
 Inspire employees
 Nurture a results-oriented climate
 Enforce high-performance standards
 Celebrate individual, group, company successes
Role #3: Promote Stronger Core
Competencies and Capabilities
 Top management intervention is
required to establish better or new
 Resource strengths and competencies
 Competitive capabilities
 Senior managers must lead the effort because
 Competencies reside in combined
efforts of different work groups and
departments, thus requiring
cross-functional collaboration
 Stronger competencies and capabilities
can lead to a competitive edge over rivals
Role #4: Display Ethics Leadership and
Lead Social Responsibility Initiatives
 Set an excellent example in Our ethics
code is . . .

 Displaying ethical behaviors

 Demonstrating character and

personal integrity in actions and decisions

 Declare
support of company’s ethics code
and expect all employees to conduct
themselves in an ethical fashion

 Encourage
compliance and establish tough
consequences for unethical behavior
Roles of a Manager in
Enforcing Ethical Behavior
 Set an excellent ethical example

 Providetraining to employees
about what is ethical and what isn’t

 Declare unequivocal support of ethics code

 Act as final arbiter on hard calls

 Remove people from key positions
if found guilty of a violation

 Reprimand people lax in monitoring ethical compliance

Structuring an Ethics Compliance
and Enforcement Process
 Form an ethics committee to give guidance on
ethics matters
 Appoint an ethics officer to head compliance effort
 Establish an ethics hotline/Web site employees can
use to
 Anonymously report a possible violation
 Get confidential advice on a
troubling ethics-related situation
 Conduct an annual ethics audit
to measure extent of
 Ethical behavior and
 Identify problem areas
Key Approaches to
Enforcing Ethical Behavior
 Have mandatory ethics trainings for employees
 Openly encourage employees to
report possible infractions via
 Anonymous calls to a hotline or
 Posting to a special company Web site
 Conduct an annual audit to assess
 Each manager’s efforts to uphold ethical standards
 Actions taken by managers to remedy deficient conduct
 Require all employees to sign a statement annually
certifying they have complied with the ethics code
 Make sure ethical violations carry appropriate
punishment, including dismissal for egregious violations
Test Your Knowledge
Assuming that a company’s senior executives are really serious
about enforcing high standards of ethical behavior, then they
probably need to consider doing all but which one of the following?
A. Appointing a committee of high-profile employees to serve on a committee or
task force that is charged with (a) being champions of high ethical standards,
(b) finding ways to ingrain high ethical standards as a cultural norm, and (3)
heading up the company’s ethics enforcement process
B. Having mandatory ethics training programs for employees
C. Conducting an annual audit of each manager’s efforts to uphold ethical
standards and requiring formal reports on the actions taken by managers to
remedy deficient conduct
D. Requiring all employees to sign a statement annually certifying that they
have complied with the company’s code of ethics and making sure that
ethical violations carry appropriate punishment, including dismissal if the
violation is sufficiently egregious
E. Openly encouraging company personnel to report possible infractions via
anonymous calls to a hotline or e-mails sent to a designated address
For Discussion: Your Opinion

What would your reaction be if your employer

required you to sign a statement annually certifying
that you have complied with the company’s code of

Actions Demonstrating Commitment
to a Strategy of Social Responsibility
 Craft a strategy that positively improves well-being of
employees, environment, communities, and society
 Use social and environmental metrics to evaluate
company performance
 Tie social and environmental performance to executive
 Take special pains to protect environment
 Take an active role in community affairs
 Generously support charitable causes
and projects benefiting society
 Support workforce diversity and commit
to overall well-being of employees
Role #5: Lead the Process of
Making Corrective Adjustments
 Requires deciding
 When adjustments are needed
 What adjustments to make
 Involves
 Adjusting long-term direction, objectives, and strategy on
an as-needed basis in response to unfolding events and
changing circumstances
 Promoting fresh initiatives to bring internal activities and
behavior into better alignment with strategy
 Making changes to pick up the pace when results fall
short of performance targets